Business News

The New York Times Company Reports 2007 Fourth-Quarter and Full-Year Results

Friday 01. February 2008 - The New York Times Company announced today fourth-quarter 2007 earnings per share (EPS) from continuing operations of $.37, compared with a loss per share of $4.59 in the fourth quarter of 2006. Excluding the special items noted below,

EPS from continuing operations was $.44 in the fourth-quarter compared with $.46 in the fourth quarter of 2006.
Fourth-quarter 2007 operating profit from continuing operations increased to $101.5 million from a loss of $685.2 million in the fourth quarter of 2006. Excluding depreciation and amortization and the special items noted below, operating profit from continuing operations was $159.2 million compared with $169.8 million in the fourth quarter of 2006.
For comparability purposes, all numbers cited in the quote below exclude special items, which are noted later in this release.
“After total revenues grew in both October and November, advertising softened in December, which had a significant effect on the quarter,” said Janet L. Robinson, president and CEO. “Although national advertising continued to increase, due in part to strength in the financial services and entertainment categories, classified and retail advertising declined as the overall economy slowed. Continuing our transition into the digital era, online revenues again demonstrated very strong growth, up nearly 18 percent in the quarter. Circulation revenues also continued to show gains, up almost 3 percent.
“Looking back at 2007, we made a great deal of progress in executing on our business strategy and positioning the Times Company for the long term. The net effect of our actions was that operating profit before depreciation and amortization grew more than 3 percent.
“We introduced profitable new products that helped extend our print properties. We also did so online and our digital revenues grew 22 percent. Circulation revenues rose about 2 percent, demonstrating the pricing power of The Times brand. As a result of rigorous expense management, costs before depreciation and amortization declined 2 percent. And after a careful review of our portfolio of businesses, we sold non-core assets that resulted in $615 million in gross proceeds. We also remained dedicated to returning value to our shareholders, increasing our dividend 31 percent.
“To date in January, the percentage decline in advertising revenue is trending similar to that of December. We see signs of a softening economy in our business. We plan to stay focused on what we do best – producing high-quality journalism, introducing new products in print and online, and stringently managing our costs.”
Fourth-Quarter Special Items
Fourth-quarter 2007 results from continuing operations included:
— A non-cash charge of $11.0 million ($6.4 million after tax, or $.04 per share) related to the write-down of an intangible asset at the Worcester Telegram & Gazette, whose results are included in the New England Media Group (NEMG), and
— A non-cash charge of $7.1 million ($4.1 million after tax, or $.03 per share) related to the write-down of our 49 percent investment in Metro Boston, LLC, which publishes a free daily newspaper in the Greater Boston area. This charge is included in “Net (loss)/income from joint ventures” in our Condensed Consolidated Statements of Income.
These items total a net loss of $18.1 million ($10.5 million after tax, or $.07 per share).
Fourth-quarter 2006 results from continuing operations included:
— A non-cash charge of $814.4 million ($735.9 million after tax, or $5.11 per share) related to the write-down of intangible assets at the NEMG, and
— An additional week (14 weeks) in 2006 compared with the fourth quarter of 2007 (13 weeks). We estimate that the week added $50.8 million in revenues, $36.8 million in costs, $14.0 million in operating profit and pre-tax income of $14.3 million ($8.3 million after tax, or $.06 per share).
These items total a net loss of $800.1 million ($727.6 million after tax, or $5.05 per share).
Comparisons
All quarterly and annual comparisons exclude the results of the Broadcast Media Group, which was sold in May 2007. We recorded a pre-tax gain on the sale of $190.0 million ($94.0 million after tax, or $.65 per share in 2007).
This release includes non-GAAP financial measures, and the exhibits include a discussion of management’s use of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures.
Fourth-Quarter Results from Continuing Operations
Revenues
Total revenues decreased 7.1 percent to $865.8 million from $931.5 million. Advertising revenues decreased 9.1 percent; circulation revenues declined 4.0 percent; and other revenues increased 1.3 percent. Excluding the additional week, total revenues decreased 1.7 percent; advertising revenues decreased 4.1 percent; circulation revenues grew 2.6 percent; and other revenues rose 5.5 percent.
Operating Costs
Operating costs decreased 6.1 percent to $753.2 million from $802.3 million. Depreciation and amortization declined 14.5 percent to $46.7 million from $54.6 million mainly due to a decrease in accelerated depreciation expense for the assets at the Edison, N.J., printing facility, which we are in the process of closing.
Excluding depreciation and amortization and the additional week, operating costs declined 0.6 percent to $706.6 million from $710.9 million. The decline was a result of lower newsprint expense and compensation costs offset by increased staff reduction costs and professional fees.
Newsprint expense for the fourth quarter decreased 30.3 percent, with 16.0 percent of the decrease resulting from lower consumption and 14.3 percent from newsprint prices. Excluding the additional week, newsprint expense declined 25.6 percent, with 14.4 percent of the decline resulting from lower prices and 11.2 percent from lower consumption.
Staff reduction costs totaled $17.8 million in the fourth quarter of 2007 and $8.5 million in the same period a year earlier.
Fourth-Quarter Business Segment Results
News Media Group
Total News Media Group revenues decreased 8.0 percent mainly due to the additional week. Excluding the additional week, total revenues decreased 2.7 percent as a result of lower print advertising.
Advertising revenues in the quarter decreased 10.5 percent mainly due to the additional week and lower print advertising revenues. Excluding the additional week, advertising revenues decreased 5.6 percent.
Circulation revenues decreased 4.0 percent mainly due to the additional week. Excluding the additional week, circulation revenues increased 2.6 percent mainly due to higher home-delivery and newsstand prices for The New York Times.
Other revenues rose 0.7 percent. Excluding the additional week, other revenues increased 4.9 percent largely because of rental income from our lease of five floors in our new headquarters, and higher commercial printing, partially offset by a decrease in subscription revenues for TimesSelect, an online product offering that was discontinued in September 2007.
Total News Media Group operating costs decreased 7.0 percent to $714.9 million from $768.5 million. Excluding depreciation and amortization and the additional week, operating costs declined 1.3 percent to $674.0 million from $682.9 million due to lower newsprint expense and compensation costs offset by increased staff reduction costs and professional fees.
Operating profit increased to $109.1 million from an operating loss of $675.6 million. Excluding special items, operating profit before depreciation and amortization was $161.0 million compared with $175.0 million in 2006, mainly due to lower print advertising.
About Group
Total About Group fourth-quarter revenues increased 26.8 percent to $30.7 million from $24.2 million. Excluding the additional week, revenues grew 34.6 percent due to higher cost-per-click and display advertising and acquisitions.
Total About Group operating costs increased 36.0 percent to $19.1 million from $14.1 million. Excluding depreciation and amortization and the additional week, operating costs rose 46.3 percent to $15.3 million from $10.4 million because of higher compensation and content costs. These increases were primarily due to investments in new revenue initiatives and costs associated with ConsumerSearch, Inc., which we acquired in May 2007.
Operating profit grew 14.0 percent to $11.6 million from $10.2 million. Excluding depreciation and amortization and the additional week, operating profit for the About Group increased 24.8 percent to $15.4 million from $12.4 million.
Other Financial Data
Internet Revenues
The additional week in 2006 had a significant effect on the comparisons of Internet revenues. In the fourth quarter, our Internet revenues grew 12.0 percent to $95.2 million from $85.0 million in the fourth quarter of 2006. For the full-year 2007, Internet revenues rose 20.2 percent to $330.2 million from $274.7 million in 2006. We estimate that the additional week contributed $4.0 million in the fourth quarter and full year of 2006. Excluding the additional week, Internet revenues grew 17.6 percent in the fourth quarter and 22.0 percent for the full year.
Internet businesses include our digital archives, NYTimes.com, Boston.com, About.com and the Web sites of our other newspaper properties. In total, Internet businesses accounted for 11.0 percent of our revenues in the fourth quarter versus 9.1 percent in the 2006 fourth quarter. For the year, Internet revenues accounted for 10.3 percent of total revenues compared with 8.3 percent in 2006.
Joint Ventures
Net loss from joint ventures was $10.6 million in the fourth quarter of 2007 compared with net income of $1.3 million mainly due to the write-down of our 49 percent investment in Metro Boston and lower prices for newsprint and supercalendared paper at the mills in which we have an equity interest.
Interest Expense-net
Interest expense-net decreased in the quarter to $10.9 million from $11.6 million due to lower levels of short-term debt partially offset by lower capitalized interest.
Income Taxes
The effective income tax rate was 34.3 percent in the fourth quarter and 41.2 percent for the full year of 2007 compared with 5.0 percent and 3.0 percent in the fourth quarter and for the full year of 2006. The majority of the 2006 non-cash charge of $814.4 million at the NEMG was not deductible for tax purposes. Excluding the non-cash charge, the effective income tax rate would have been 36.6 percent in the fourth quarter and 36.2 percent for the full year of 2006.
Cash and Total Debt
At the end of the quarter, our cash and cash equivalents were approximately $52 million and total debt was approximately $1 billion.
Capital Expenditures
In the fourth quarter, total capital expenditures were approximately $84 million, which included approximately $16 million for our new headquarters, and approximately $32 million related to the New York area plant consolidation project.
For the year, total capital expenditures were approximately $375 million, including approximately $166 million for our new headquarters, and approximately $99 million related to the New York area plant consolidation project.
2008
The following expectations are for 2008 with the exception of costs savings and productivity gains, which are for 2008 and 2009.
— Cost savings and productivity gains – The Company believes that it can achieve a reduction in costs from its year-end 2007 cash cost base of a total of approximately $230 million in 2008 and 2009, excluding the effects of inflation and certain one-time costs. About $130 million of these savings are expected in 2008.
— Depreciation and amortization – $160 to $170 million, which includes approximately $5 million of accelerated depreciation expense in the first quarter of 2008 associated with the New York area plant consolidation project. Depreciation for the new headquarters building is expected to be $8 million per quarter.
— Income from joint ventures – $12 to $16 million.
— Interest expense – $50 to $60 million.
— Capital expenditures – $150 to $175 million. Aside from significant projects, other capital spending is projected to be $65 to $75 million in 2008.
— Income tax rate – Approximately 41 percent.